The ongoing feud between the states and the federal government over the siting of onshore liquefied natural gas (LNG) terminals could become even more heated if two companion bills are passed by the California Assembly.

Now making their way through the state legislature are SB 1003, which would establish the California Energy Commission (CEC) as the premiere state permitting authority over LNG facilities to the exclusion of all other city, state or local authorities, and SB 426, which would require the CEC to evaluate, compare and rank permit applicants seeking to build LNG facilities on California’s coast.

SB 426, sponsored by state Sen. Joe Simitian, D-Palo Alto, calls on the CEC to make an LNG needs assessment study of the demand and supply for natural gas and alternatives to natural gas to meet the state’s energy demands, and to determine the number of LNG terminals, if any, needed to meet California’s projected gas demand. The bill would require the LNG needs study, upon the filing of an application for a permit to construct or operate an LNG terminal, to be completed no later than Nov. 1, 2006, and incorporated into its biennial integrated energy policy report.

All of the costs for the needs study, including costs for any temporary personnel or consultants, would be funded from fees charged to persons or companies applying for permits to build and operate an LNG terminal.

The measure would require the CEC to compare and rank every site for which an application for a permit to build and operate and LNG terminal has been filed. The commission can issue a permit only if it determines that the technology chosen for a particular site will have the least adverse public health, safety and environmental impacts.

SB 426 would take effect only if SB 1003, sponsored by state Sen. Martha Escutia, D-San Diego, is also enacted into law on or before Jan. 1, 2006. So far, SB 426 has cleared the Senate Utilities and Commerce Committee and the Senate Natural Resources Committee. It is now headed to the Senate Appropriations Committee and then to the Assembly floor.

If approved by the legislature, SB 426 would give the California the authority to rank where it wants LNG terminals to be sited, although it would not usurp the authority of the Federal Energy Regulatory Commission, a California legislative source said. In the event that FERC would choose to site an LNG facility at a location other than that preferred by the state, the matter could potentially wind up in court, he noted.

The CEC was picked as the primary state permitting authority for LNG terminals over the California Public Utilities Commission (CPUC) because “we didn’t believe the CPUC has the kind of expertise we wanted with needs analysis,” the source said.

The CPUC and FERC currently are involved in a bitter court dispute over who has the “exclusive” authority over the siting of onshore LNG terminals. “Even if the feds preempt us, it’s going to be a firestorm out here,” he noted. The state doesn’t want the LNG terminal project for the Port of Long Beach, CA, which is at the center of the FERC vs. California legal battle, to be “shoved down our throats.”

The California Manufacturers and Technology Association (CMTA) said it was opposed to both measures. “There is no finding that the [existing] processes for approving LNG facilities are inadequate to protect the environment and ensure the health and safety of California citizens…The proposed LNG projects are undergoing extensive public review by multiple federal and state agencies,” the group said of SB 426.

“Each [LNG] project should have the opportunity to meet federal and state requirements and acquire a permit without the CEC choosing winners among them,” it noted.

Moreover, “the requirement to find ‘need’ for LNG is inappropriate when private companies rather than regulated utilities will be making the capital and operating investments in the LNG facilities. The LNG companies, not utility ratepayers, are at risk for their investments.”

As for SB 1003, “this bill would establish duplicative and unnecessary permitting processes that could cause severe delays in the delivery of new natural gas supplies to California,” the CMTA said.

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